I don’t want to read another ‘Ominous Omnibus’ or ‘Thrown Under the Omnibus’ headline.
Yes, the uncertainty is unsettling and, amongst other things, the ‘stop the clock’ terminology is particularly jarring when we consider a global landscape of rising temperatures, sea levels, and political tensions. Stopping the clock is a privilege we no longer have at our disposal.
But despite the uncertainty and the doom mongering, we’re looking for the silver linings (because in this line of work, you have to) - and there are many when you start to read between the lines.
The overwhelming concern is that the EU is pedalling a misleading narrative - one that views sustainability reporting and due diligence as a cost burden for companies that undercuts competitiveness. Indeed, the Draghi Report emphasised the aim that simplifications will cut compliance costs and that a reduction of such costs will boost the competitiveness of businesses. This is, perhaps, partly why we have found ourselves in a situation in which simplification has arguably toppled over into deregulation.
But this is contrary to what we know to be true.
Salterbaxter has long been an advocate for moving beyond compliance and viewing it as a management framework to successfully embed sustainability.
In particular, double materiality assessments (DMA) - when done right - have the potential to create considerable value for companies, extending beyond compliance and sustainability reporting requirements. This is why we’re particularly relieved of the decision to retain the DMA requirements beneath CSRD, the rich insights of which can be used to: better identify emerging risks and build resilience, better inform capital and budgeting decisions, and create competitive advantage through better integrating sustainability into business strategy…(I could go on).
It’s time to free ourselves from the compliance narrative…
If the proposals are passed through European parliament, many companies will no longer face legal pressure to report anymore. And from conversations with our clients, we appreciate just how much of a brain drain these regulations can be.
But regulation has never been the only driver, so this doesn’t mean companies are off the hook from reporting for good. While the regulators may not demand it, European investors will continue to demand sustainability information from investee companies as part of their fiduciary duty.
But what it does do, is provide an opportunity to move beyond viewing reporting as merely a box ticking, regulatory driven exercise. It allows companies a well-deserved pause in which to take a step back and have conversations on why sustainability due diligence and reporting really matters. Asking yourselves - how can we ensure our ESG data works harder? How can we better engage with and activate our stakeholders - from employees to consumers? How can we further embed sustainability across the business?
So no, you may no longer be in scope, but you do now have the freedom to focus on the more strategic, business-relevant elements of the regulations.
…and unlock a new narrative of value
Yes, engaging senior leadership and finance teams may have just got a little harder. But the work done so far has by no means been wasted. It has built critical insights that businesses can act on now.
Far from ‘stopping the clock’, we are advocates for viewing this as an opportune moment in time for businesses to push internal conversations and re-think corporate value creation. Use this time carefully to maintain momentum, working across teams to strengthen your approach, drive meaningful action and apply integrated thinking to break down internal silos, capturing the interplay between sustainability reporting, due diligence, and sustainability transformation.
Let’s collectively shift the conversation from ‘are we ready to disclose?’ to ‘are we ready to embed and lead’?